Fitch upgrades Vietnam's credit rating to BB+ amid economic growth

It expects foreign direct investment (FDI) inflows into the country to continue to drive sustained improvements in its structural credit metrics.

The rating agency is increasingly confident that near-term economic headwinds from property-sector stresses, weak external demand and delays in policy implementation owing to a corruption crackdown are unlikely to affect medium-term macroeconomic prospects. Policy buffers are sufficient to manage near-term risks, it feels.

The country is projected to achieve a medium-term growth of around 7 per cent due to its cost competitiveness, educated workforce relative to peers, entry into regional and global free-trade agreements and strong FDI inflows amid global supply chain diversification.

Foreign exchange reserves in the country improved modestly to $89 billion by September end this year, after a sharp drop in 2022. Reserves are expected to improve further in 2024-2025 with coverage of current external payments averaging about three months, under Fitch Ratings’ baseline.

The country’s external debt composition stays favourable, as most of the debt is owed to bilateral and multilaterals. This leads to a lower external debt service burden and supports its high external liquidity ratio.

Fitch Ratings believes that as the government continues to implement policies to support growth and stabilise the macroeconomy, the country’s economy will regain growth momentum soon.

ALCHEMPro News Desk (DS)